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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) MAY 15, 1999
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COMPOST AMERICA HOLDING COMPANY, INC.
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(Exact name of registrant as specified in its charter)
NEW JERSEY 0-27832 22-2603175
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
3000 HADLEY ROAD SOUTH PLAINFIELD, NEW JERSEY 07080
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 668-9335
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N/A
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(Former name or former address, if changed since last report.)
PLEASE ADDRESS ALL CORRESPONDENCE TO: Mark Gasarch, Esq.
40 West 57th Street
33rd Floor
New York, New York 10019
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ITEM 5. OTHER EVENTS
On May 15, 1999, Compost America Holding Company, Inc. (the "Company") as
Borrower, defaulted in the payment of a $1,000,000 Acquisition Refinancing
Promissory Note, plus an additional $150,000 in accrued interest and penalties,
payable to Equity Investments of Delaware, Inc., as Lender. The Lender also is
the holder of a $2,000,000 Convertible Term Loan Promissory Note of the
Borrower, due November 1, 2000, now in default as a result of cross-default
provisions in the $1,000,000 Note. Both Notes are secured by a first mortgage on
property located in Newark, New Jersey (the "Property") owned by a subsidiary of
the Company upon which the Company intends to construct its Newark, New Jersey
composting facility. The Lender has commenced proceedings to collect upon the
Notes and to foreclose on the Property. Should the Property be foreclosed, and
ownership thereof be transferred to an entity unrelated to the Company, the
Company in all likelihood would not be able to proceed with its Newark
composting facility. The Company intends to pay the two defaulted Notes prior to
any foreclosure, but to date has not identified any specific source of funds for
this payment.
On May 15, 1999, the Company also defaulted on the payment of approximately
$5,700,000 of promissory notes payable to VRH Construction Corp., which notes
are secured by a second mortgage on the Property. The Company has entered into
discussions with VRH Construction Corp. seeking an extension of the maturity
dates of these notes. There can be no assurance that such an extension will be
granted, and the Company has no funds available at this time to pay these notes.
Should the Property be foreclosed, and ownership thereof be transferred to an
entity unrelated to the Company, the Company in all likelihood would not be able
to proceed with its Newark composting facility.
The status of other litigation in which the Company is a defendant, or material
claims involving the Company, is as follows:
1. BIO-SERVICES, INC., PLAINTIFF, V. COMPOST AMERICA HOLDING
COMPANY, INC. MONMOUTH RECYCLING AND COMPOSTING COMPANY, INC.,
DEFENDANTS, filed on September 4, 1998 in the Superior Court
of New Jersey, Chancery Division, Monmouth County, Docket No.
MONC 224-28.
This is a claim for alleged breach of contractual obligations, seeking
damages of approximately $333,125, plus 12,500 shares of the Company's
common stock, plus interest and expenses. The Company has filed an
answer denying all liability as asserted in the Complaint. A motion by
the Plaintiff for summary judgment is pending before the Court. The
Company has opposed this motion, and intends to contest this matter
vigorously.
2. BROWNFIELD PARTNERS, PLAINTIFF, V. COMPOST AMERICA HOLDING
COMPANY, INC., DEFENDANT, filed on March 12, 1999 in the
Superior Court, Law Division, Monmouth County, State of New
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Jersey, Docket No. MON-L-1248-89.
This is an action to collect a $200,000 mortgage note, secured by a
first lien on the Company's 15 acre property in Freehold, New Jersey.
The Company is attempting to renegotiate the terms of the note,
including an extension of the due date.
3. KAPLAN GOTTBETTER & LEVENSON, LLP AND ADAM S. GOTTBETTER, PLAINTIFFS V.
COMPOST AMERICA HOLDING COMPANY, INC., DEFENDANT, filed on December 14,
1998 in the United States District Court, Southern District of New
York.
This is an action alleging breach of a consulting agreement and seeking
compensatory damages of approximately $350,000, plus interest, costs
and expenses. A motion by the Plaintiff for summary judgment is pending
before the Court. The Company has filed an Answer denying all liability
and intends to contest this matter vigorously.
4. CAPITAL ACTIVE FUNDING, INC., PLAINTIFF, V. COMPOST AMERICA HOLDING
COMPANY, INC., ET. AL., DEFENDANT, filed on October 16, 1998 in the
Superior Court of the State of Arizona, County of Maricopa, Docket # CV
98-18623.
Plaintiff obtained a judgment against the Company, amongst others, in
the amount of $145,029.50. The Company has commenced discussions with
counsel to the Plaintiffs and the other Defendants, and expects to
reach a compromise and settlement in this matter. At this time, the
Company has not identified or reserved any source of funds to effect
any such settlement.
5. NUCENTURY AUTO, INC., PLAINTIFF, V. COMPOST AMERICA HOLDING
COMPANY, INC. AND CHICAGO RECYCLING AND COMPOST COMPANY, INC.,
DEFENDANTS, filed on February 28, 1998 in the Circuit Court of
the Twelfth Judicial Circuit, Will County, State of Illinois,
Docket # 99 L 129.
This is a claim against the Company for $266,256,68 for site
development work performed on behalf of the Company in Riverside,
Illinois. The Company intends to attempt to resolve
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this matter through settlement discussions. If such efforts are not
successful, the Company intends to file and Answer and to defend the
lawsuit vigorously.
6. INTERNAL REVENUE SERVICE. The Company recently settled two matters with
the Internal Revenue Service. However, the issue of penalties in the
amount of approximately $75,000 in the first matter and approximately
$32,000 in the second matter remains unresolved. The Company believes,
after discussions with the Internal Revenue Service, that the penalties
regarding the first matter will be waived, but that the penalties
regarding the second matter will not. At this time, the Company has not
identified or reserved any source of funds to pay either or both of
these penalties.
7. CLAIM BY FORMER EMPLOYEE/CONSULTANT. A former employee and consultant
to the Company has claimed monies owed for services rendered in the
amount of approximately $160,000. The Company has entered into
negotiations seeking an agreement on the exact amount due, and has made
a good faith payment of $40,000 while these negotiations are taking
place.
8. CLAIM BY DEVRO-TEEPAK, INC. In 1995, Devro-Teepak, Inc. ("Teepak") made
loans to the Company aggregating approximately $265,000, to be repaid
out of the funding for the Company's Chicago, Illinois, composting
facility. Teepak now claims that this composting facility project has
been abandoned by the Company, and therefore approximately $310,000
(the $265,000 plus interest) is now due. The Company intends to contest
this claim vigorously on the grounds that the Company having secured
certain permits indicates that the project has not been abandoned, and
that therefore repayment of the Teepak loan is due only upon the
funding of the facility.
9. LOAN FROM VAUXHALL '98, L.L.C. On December 30, 1998 the Company
borrowed $500,000 from Vauxhall '98, L.L.C. This loan provided for a
maturity date of November 30, 2000, or earlier if the Company received
a series of loans totalling at least $1,500,000. The Company has
received loans totalling in excess of $1,500,000, and therefore this
loan is now due. The Company has not repaid this loan and, at present,
does not have the funds available to make such repayment. To date, the
lender has not taken any steps to declare an event of default or to
collect the loan.
10. CREDIT, CAPITALIZATION AND FINANCING AGREEMENT BETWEEN COMPOST AMERICA
HOLDING COMPANY, INC., AND TWO OF ITS SUBSIDIARIES, MIAMI RECYCLING
AND COMPOSTING COMPANY, INC. AND BEDMINSTER SEACOR SERVICES MIAMI
CORPORATION, AND LIONHART GLOBAL APPRECIATION FUND, AND ITS
AFFILIATES, DATED OCTOBER 30, 1998 ("AGREEMENT").
The various judgments set forth above appear to constitute an "Event of
Default" under this Agreement, such that Lionhart
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Global Appreciation Fund ("Lionhart") could accelerate the collection
of its $10,500,000 (face amount) promissory note, secured by certain
real property in the State of Florida and by the Company's ownership
interest in Miami Recycling and Composting Company, Inc. and Bedminster
Seacor Services Miami Corporation. Other apparent "Events of Default"
under this Agreement include the failure to obtain Lionhart's prior
consent to certain borrowings made by the Company, failure to deliver
all documents required at the closing of this loan, significant overdue
accounts payable and the Company's default in payment of the $1,000,000
Acquisition Refinancing Promissory Note and the resultant default in
the $2,000,000 Convertible Term Loan Promissory Note discussed above.
Lionhart has advised the Company that it is aware of these prospective
Events of Default, that it reserves its rights to proceed under this
Agreement, but at this time has not proceeded against the Company in
this regard. The Company and Lionhart are in discussions to resolve
this matter, with no assurance that any such agreement can be reached.
Should Lionhart accelerate the payment of its promissory note, the
Company, at this time, would not have the funds available to pay this
note. Moreover, should Lionhart acquire the collateral pledged on this
note, specifically the ownership of Miami Recycling and Composting
Company, Inc. and Bedminster Seacor Services Miami Corporation, the
Company would not be able to proceed with its plans to construct one or
more Dade County, Florida composting facilities.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 27, 1999
COMPOST AMERICA HOLDING COMPANY, INC.
(Registrant)
By /s/ Roger E. Tuttle
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Roger E. Tuttle, Chairman
